U.S. EARNINGS ANALYSIS AND TALKING POINTS
- Banks bolster net reserves showing concerns around the 2023 macro-economic outlook.
- NII improves for BAC, WFC and JPM but weaker IB limits upside.
U.S. banks in general have kicked off 2023 in the green with JPMorgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) no exception. Higher interest rates as directed by the Federal Reserve’s aggressive monetary policy, has allowed for Net Interest Income (NII) to grow but fears around a global slowdown has forced banks to strengthen their net reserves.
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BANK OF AMERICA (BAC)
Bank of America beat estimates across the board with Earnings Per Share (EPS) at 0.85c, 7 cents higher than expectations, while revenue came in at $24.53 billion vs $24.14 billion. NII pushed higher to $14.7 billion for Q4 2022 on the back of higher interest rates but declines in Investment Banking (IB) and asset management lowered noninterest income 8% to $9.9 billion. Another interesting statistic comes from the increase in provision for credit losses as higher interest rates can bring about defaults, coupled with a bleak economic outlook for 2023 and recessionary fears, BAC is clearly bolstering their coffers as a hedge against economic uncertainty.
CEO Brian Moynihan – “Our earnings of $27.5 billion for the year represent one of the best years ever for the bank, reflecting our long-term focus on client relationships and our responsible growth strategy.”
BAC DAILY CHART
Chart prepared by Warren Venketas, IG
WELLS FARGO (WFC)
WFC similarly saw gains in the NII metric up 45% YoY but followed a similar trajectory to both BAC and JPM with lower noninterest income via various functions including private equity, divestitures, venture capital and declines in mortgage banking income to name a few. Provisions for credit losses grew to $0.957 billion vs $0.8602 billion expected once again showing the preparedness by major banks for a possible economic downturn in 2023. EPS disappointed coming in at 67 cents vs $1.33 due to expenses linked to the fake accounts scandal as resulting in a 50% decline in fourth quarter profits.
CEO Charlie Scharf – ““Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns.”
WFC DAILY CHART
Chart prepared by Warren Venketas, IG
JPMORGAN CHASE (JPM)
JPM did not buck the trend of the other two banks showing higher NII, lower noninterest income and increased reserves (as well as net charge-offs). EPS beat estimates of $3.10 publishing at $3.57. Both fixed income and equity trading revenue missed forecasts
CEO Jamie Dimon – “We remain vigilant and are prepared for whatever happens, so we can serve our customers, clients and communities around the world across a broad range of economic environments.”
JPM DAILY CHART
Chart prepared by Warren Venketas, IG
Goldman Sachs (GS) and Morgan Stanley (MS) results are anticipated next week Monday (17th of January, 2023) in the pre-market and will likely echo the sentiments shown by the above earnings.
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